Workshop Cash and Budget
“Cash is King!”
Helmer Vossers
Ministry of Finance
The Netherlands
17 February 2006
1
Budget process:summing up
2
Questions:
 Is the budget the instrument for
implementing government policies?
 Do you report on a regular basis on the
budget-outcomes during the execution?
 Can you relate your cash information to
budget-lines?
 Do you analyze every year the budget
outcome and the budget forecasts?
 Is this review done for every line-item?
3
Budget paradox
 Trend: we see reforms towards performance based
budgeting and management
 But cash info still remains very important  why?
1. fiscal aggregates (EMU-deficit) is based on
cash (sub-national parts!)
2. allocation, authorisation accounting is on
cash
3. input info needed for benchmarking: number
of personel, it and housing-costs
4
The rules of the game, part 1!
Dealing with windfalls and overspendings….
 The rules of budgetary discipline
 Status rules: part of coalition agreement, no
law
 Main rule: Compensate within your own
budget!
 An unwritten law but even used in parliament
 Surplus windfalls are for minister of Finance,
but
 Carry-over principle ( 2 % of total budget)
5
The rules of the game, part 2!
….. But can only be maintained when budget is
reliable
 Monthly report of budget-execution
 Monthly meeting inspectorate and spending
department
 Under- and overspending review for 4-5 years
 Strong link between realization and multi-year
forecast
 To be supported by IT-system
6
The rules of the game, part 2 !
….. But can only be maintained when budget is reliable
 Multi layer financial responsibility: flexibility
 Bottom-up approach: estimates based on
assumptions from line ministries
 Estimations in unchanged prices
 Assumption of unchanged policy (demographic
development included)
 Check by ministry of Finance
7
Bookkeepers  budget analysts!
8
How does it really work?
 Example of budget preparations and budget execution
in relation to overruns and compensation
 Underspending for us! But also carry-over principle:
service not delivered
9
Multi annual budgeting
year t
t+1*
t+2*
t+3*
t+4*
Appr.
budget
100
110
120
130
140
Exec
15
15
10
5
0
5
0
Comp
Total 115
10
15
10
110
120
130
140
Conduction of central administration
 Spending department can decide on the number of
banking-accounts
 No ex-ante checks on payments
 Discussion on cash forecasts by spending units
 All government units included!
 Working processes supported by IT-systems
 Complex process
11
Information flow; but zero balancing
Ministry of
Finance
Government
Offices
c
1
a
Commercial
bank
2
e
Central Bank
b
Customer/person
12
d
Information flow
Real money transfer
To wrap up….





13
No money on bank accounts: zero balancing
Using infrastructure of commercial banks
Current account administration with MoF
Many checks and balances
Spending ministers are responsible
themselves!
Information exchange supported by
IT-systems
 Budgetary system RIS/IBOS
 forecasts versus realization
 explanation of mutations
 insight in liabilities (intended and realized)
 on a multi annual basis
 linked with cash information through
banking accounts
14
Check your position on the web
15
16
Animatie door Daan Vossers
To summarise
 All mentioned features and agreements of Dutch
Budget policy are covered in our IT-systems
 Systems comply with division of responsibilities
 Conditions: Information shoud be in time, complete
and correct: but also sharing of information
 Rules, rules, rules
 Teach the line-ministeries
 System works with multi annual figures
 Cash info essential for reliability
17